CUET Economics Previous Year Solved Paper 4 (19 July 2022 Slot-1) - Humanities/Arts MCQ

This problem involves selection of goods and services to be produced and the quantity to be produced of agricultural and industrial products.

Example – Shuttlecock is a Normal Good and in the sport of Badminton, Racket and shuttlecock are complementary Goods. If Price of Racket i.e. complementary good will fall then demand for shuttlecock i.e. normal good will increase and thereby the demand curve of normal good (here, shuttlecock) will shift rightward.

Price Elasticity of demand = % change in quantity demanded/% change in price = (–)2/4 = (-)0.5

Capital depreciation refers to the decline in value of a capital asset. It is expected wear and tear.

Income Method – NDPfc = COE + OS + MI and NNPfc(National Income)
= NDPfc + NFIA (5500 – 50
= 2800 + 1500 + MI
i.e. MI = 1150)

Metro Fare by household is Private final consumption expenditure whereas purchase of oven by a baker is Investment Expenditure

Flow variables are economic variables that represent the changes in economic values over a specific period of time. They are measured per unit of time, such as per day, per month, or per year. Among the given alternatives, the following are the reasons why Option B is the flow variable:
Option A: Cash at bank in the saving account of a household

• This is a stock variable because it represents the accumulated savings of a household at a specific point in time.

Option B: Interest received by a household on his deposits in the bank

• This is a flow variable because it represents the income generated from the deposits over a specific period of time (e.g., monthly or yearly interest).

Option C: Capital stock of a firm

• This is a stock variable because it represents the total value of a firm's capital assets at a specific point in time.

Option D: Wealth of an industrialist

• This is a stock variable because it represents the accumulated wealth of an individual at a specific point in time.

Activities resulting in benefits to others are called positive externalities and increase welfare whereas those resulting in harm to others are called negative externalities and thus decrease welfare.

GNP Deflator = (Nominal GNP/Real GNP) x 100
= (5000/6000) x 100
= 83.33

(AS)Y = C + I (AD)
(Y = 100 + 0.75Y + 1100 i.e. 0.25Y = 1200 and Y = 4800)

The correct answer is B: C, A, D, B. Here's an explanation of the chronological order of events:
1. Unintended accumulation of inventories (C)

• When ex-ante demand is less than ex-ante supply, it means that producers are producing more goods than consumers are willing to buy at the given prices.
• As a result, there will be an unintended accumulation of inventories, as unsold goods pile up in warehouses and on store shelves.

2. Producer reacts by reducing output and employment (A)

• To alleviate the problem of excess inventories, producers will respond by cutting back on production.
• This may involve reducing the number of workers employed, scaling back the use of raw materials, or lowering production targets.

3. When output reduces, income also reduces (D)

• As producers reduce output, the overall income in the economy will also decrease.
• This is because workers may have their hours cut or lose their jobs entirely, resulting in lower wages and a reduction in overall spending.

4. The process goes on until ex-ante demand becomes equal to ex-ante supply (B)

• This process of reducing output and employment will continue until the excess inventories are cleared and ex-ante demand equals ex-ante supply.
• At this point, the economy will have reached a new equilibrium, with the level of production matching the level of demand.

In summary, when ex-ante demand is less than ex-ante supply, the sequence of events unfolds as follows: unintended accumulation of inventories (C), producers reducing output and employment (A), reduced income (D), and the process continuing until ex-ante demand equals ex-ante supply (B).

If Half of the income is sav ed, then MPS = 0.5 and investment multiplier k = 1/MPS i.e. 
K = 1/0.5
= 2

The size of investment multiplier directly depends on Marginal Propensity to consume as K = 1/1-c i.e. if MPC increases then size of investment multiplier also increases.

A utonomous consumption is that level of consumption which does not depend on the level of income

• Bank Rate- Bank rate is the rate of interest at which central bank lends to commercial banks without any collateral (security for purpose of loan)
• CRR – It refers to the minimum percentage of a bank’s total deposits, which it is required to keep with the central bank.
• Decrease in these rates makes commercial bank to decrease their lending rates, which encourages borrowers from taking loans, which encourages investment and increase Money Supply
• Central bank purchases of government securities and bonds from commercial bank increases the power of commercial bank of giving loans increases, which will increase money supply

• National Financial Switch is the largest network of shared automated teller machines in India.
• A digital wallet, also known as an e-wallet, is an electronic device, online service, or software program that allows one party to make electronic transactions with another party bartering digital currency units for goods and services.
• Aadhaar Enabled Payment System (AEPS) is a payment service that allows a bank customer to use Aadhaar as his/her identity to access his/ her Aadhaar enabled bank account and perform basic banking transactions like balance enquiry, cash withdrawal, remittances through a Business Correspondent.

Total Deposits = Initi l Deposits × 1/CRR
= 2000/0.25
= 8000

The correct answer is C: A and D only.
To understand why, let's break down the different statements:
A. At break-even level of income (Y), C = Y

• At the break-even level of income, all the income generated is consumed, and there are no savings. In other words, Consumption (C) equals Income (Y). So, this statement is correct.

B. At break-even level of income (Y), C > Y

• This statement suggests that Consumption is greater than Income at the break-even level, which is not possible. Therefore, this statement is incorrect.

C. At break-even level of income (Y), S = I

• This statement suggests that Savings equals Investment at the break-even level of income. However, at the break-even level, all income is consumed, and there are no savings. So, this statement is incorrect.

D. At break-even level of income (Y), S = 0

• At the break-even level of income, all income is consumed, and there are no savings. Therefore, Savings (S) equals 0. So, this statement is correct.

E. At break-even level of income (Y), C = 0

• This statement suggests that Consumption is 0 at the break-even level of income. However, at the break-even level, all income is consumed, and Consumption (C) equals Income (Y). So, this statement is incorrect.

Foreign exchange refers to the exchange of one currency for another or the conversion of one currency into another currency. The supply of foreign exchange increases when foreign currency enters the country, either through foreign investment, exports, or remittances.
Option A: Purchase of land in England

• This will not increase the supply of foreign exchange as it involves spending national currency outside the country, which will decrease the supply of foreign exchange.

Option B: Donation of US $50 million received from Microsoft

• This will increase the supply of foreign exchange as it involves the inflow of foreign currency into the country.
• When a country receives a donation or investment from a foreign company or individual, it increases the foreign currency reserves, thereby increasing the supply of foreign exchange.

Option C: Indian students going to the USA for MBA

• This will not increase the supply of foreign exchange as it involves spending national currency outside the country, which will decrease the supply of foreign exchange.
• When students go abroad for education, they have to pay for their tuition, accommodation, and other expenses in foreign currency, which reduces the supply of foreign exchange in the home country.

Option D: Import of goods from China

• This will not increase the supply of foreign exchange as it involves spending national currency to buy goods from other countries, which will decrease the supply of foreign exchange.

In conclusion, among the given options, a donation of US $50 million received from Microsoft will increase the supply of foreign exchange, as it brings foreign currency into the country.

Current account surpluses ref er to positiv e current account balances, meaning that a country has more exports than imports of goods and services

The Great Leap Forward (GLF) was a campaign initiated in 1958 in China by Mao’s, which was aimed to modernise the China’s economy. The campaign was imitated towards the large-scale industrialisation in the country not concentrated only in the urban areas. The people were motivated to set up industries in their backyards.

Global Economic Groups – Countries who share similar economic status – G8 (Group of Developed Countries)

• India and Pakistan got Independence in 1947
• People’s Republic of China established in 1949
• Announcement of First Five Year Plan by India in 1951
• Announcement of First Five Year Plan by China in 1953
• Announcement of First Five Year Plan by Pakistan in 1956

Economic infrastructure directly supports economic growth.

Policy Instruments

• Guarantee of Minimum Support Prices (MSP) for agricultural products.
• Storage of surplus stocks (buffer) of wheat and rice by Food Corporation of India (FCI) Distribution of food staples and sugar through PDS